Optimal Global Asset Allocation Strategy

Very Hard Asset Allocation Global Asset Allocation

Global Asset Allocation is a significant aspect of portfolio management as it relates to optimizing the allocation of assets across different geographies to enhance returns and manage risk. Consider a hypothetical investor who aims to build a diversified global portfolio. They analyze expected returns from different asset classes in North America, Europe, and Asia-Pacific, taking into account local macroeconomic conditions, interest rates, and political stability.

Now, the investor is trying to decide on the optimal allocation percentages between equities, fixed income, and alternative investments across these regions. The investor's model indicates that North American equities are expected to perform well due to robust corporate earnings, but geopolitical tensions in Europe might depress returns on European equities. Conversely, emerging markets in the Asia-Pacific region are expected to grow significantly due to favorable demographics and economic reforms.

Given these insights, which of the following asset allocation strategies would be most beneficial for the investor to maximize their risk-adjusted returns?

Allocate 60% to North American equities, 20% to European equities, and 20% to Asia-Pacific fixed income.

Allocate 50% to Asia-Pacific equities, 30% to North American fixed income, and 20% to European equities.

Allocate 70% to Asia-Pacific equities, 20% to North American equities, and 10% to alternative investments.

Hint

Submitted5.9K

Correct5.8K

% Correct98%